Having children is expensive. More so if you want to educate them privately in Indonesia. So how do you raise the cash to make sure they get the best start possible?
Raising a child in Indonesia these days is eye-wateringly expensive if you want them to learn in an international school. According to the current prices, an education at the British International School in Jakarta will cost in excess of 350,000USD and that’s before taking into account a decade’s worth of inflation and all the other associated costs.
So don’t be in any doubts: you need to save as much as possible, as early as possible. And you may need to consider investing, to give yourself the chance of raising enough money for your preferred options.
Work out the overall cost
Before you start cancelling holidays and cutting every luxury out of your life, it’s worth considering what the total sum you have to raise actually is.
Do a significant amount of research long before sending your child to school. Work out which school you really want for them. Think about your budget, the commute they will face and the overall performance of the schools.
Calculate the cost of a year (this information can be found on their websites) and multiply that by the years they will be there but also factor an increase of around 10% per year. Once you have come to a figure, you now have a target. With a goal, you can now make a plan.
Raising the cash within five years
If you’re trying to raise money for a child who’s starting school within the next five years then you need to move fast. You’re going to need cash on hand when they start school as fees are normally payable in advance at the beginning of each term.
Cash savings accounts don’t carry the risk that you might get back less than you put in. However, you should shop around for the best possible interest rates, as the spending power of cash is continually eroded by inflation.
Generally speaking, you’ll give yourself the chance to earn higher returns if you’re willing to leave your money untouched for longer. So bear this in mind as you work out how much money you’ll need by when. If you know, for example, that you’ll need to pay a certain fee by a certain date then you may be better off putting that money into a deposit account that is inaccessible until the date in question, or just before. By tying your money up in this way, you will probably be able to earn a higher rate of interest than by putting it into an account that offers instant access.
What to consider if you’ve got more than five years to play with
If you’re trying to raise money for an educational expense that’s more than five years away, or if – better still – you’re raising it for a child who hasn’t been born yet, congratulations! You’ve given yourself the opportunity to raise significantly more.
Cash savings accounts will still be an important part of your plans as you move closer to your goal, but in the meantime you could consider investing, which will give you the chance of earning significantly higher returns. You can learn more about the basics of investing and how to start making plans with an advisor.
Investing is better suited to longer-term objectives because it inevitably involves ups and downs, and if you experience a drop in the value of your investments then it makes sense to give yourself more time to recover the losses.
What’s more, if you can leave your investments alone for longer and reinvest the income generated, then – just as with savings – you’ll leave more time for ‘compound interest’ to weave its magic. Compound interest is what happens when interest itself earns interest, and creates a snowball effect that can dramatically increase the value of your original capital. Income generated from stocks is known as dividends rather than interest but the same principle applies.
If you have a financial adviser in Indonesia then they can help you plan how to finance your child’s education, in line with your other needs and goals.
Source: Old Mutual